A libertarian form of protest

January 30, 2008
Here is a suggestion from Glenn Reynolds for Brandeis students.
 
I've often asked whether some of the mainstream libertarian groups are actually helping to reduce government spending.  In this post Professor Somin suggests that giving all the money that went to Ron Paul to someplace like the Institute for Justice would have furthered libertarian causes.
 
I sympathize with the sentiment behind this proposition, but I have to respectfully disagree.  IJ does some marvelous work, but even some of their best work can lead to big set backs for libertarians by establishing unfavorable Constitutional precedents, for example.
 
But what if, instead of fighting the good fight, libertarians legal institutions starting calling the welfare state's bluff?  Virtually everything the government does is a taking of some kind, so let's sue constantly under the takings clause.  The liberal justices on the Supreme Court thought that every piece of water in the US was a "navigable waterway" – so the next time a little kid pees in the inflatable pool in his backyard, let's demand that the EPA regulate his emissions.  If the SC opts for a collective right on the 2nd amendment, let's demand a collective interpretation of other amendments that have similar language. 
 
I'm certainly not the best person to come up with examples here, but I'm sure some good lawyers could a great job.  The point is that libertarian goals might be set back a little, in the short run.  But to actually make the government bear all the burdens of its regulations would, in the long run, cripple it.
 
Or maybe this is a crappy idea – who knows?  I do know that the state doesn't seem to be getting smaller, so we should try something new.

No McCain Derangement Syndrome here

January 30, 2008

Apparently Mr Levin should read his own blog more carefully.

See here for a less deranged take and here for my favorite one so far.

Update: a useful reminder here.


Democracy and Libertarianism

January 29, 2008

An interesting debate between a couple of the Professors at the Volokh Conspiracy end here.  I think I come down closer to the Professor Somin camp.


Review of "Robinson Crusoe" by Daniel Defoe

January 29, 2008

You can find this book here. I thought this book was ok, I guess it’s important for economists to read. I can certainly see why Crusoe figures so heavily in exploring economic theories. However, I generally agree with the reviewer on Amazon, who said:

“Robinson Crusoe” is an important story. Not only is it one of the earlier
novels in Europe’s history, but the idea of being stranded on an island and
having to make due for yourself without society or civilized luxuries is an
important one that has made a wave throughout our culture, and has been
regurgitated by various re-inventors plenty of times as well. However, as a
story for itself, it isn’t very engaging, and if it were up to me, I’d say Defoe
could have used a stricter editor, to get his ideas and events across to the
reader more smoothly without pushing them away from the book.

Update: The longer I’ve had to reflect on this book, the better it has gotten, in my mind. I’m not exactly sure why, but perhaps it is Defoe’s portrayal of human survival and way Crusoe succeeds despite his complete isolation.


One more thought on "The Forgotten Man"

January 29, 2008

I have one more comment on the reviews of Ms Shlaes’ book.  Many, in fact all, Conservative and Libertarian publications that I found that reviewed the book, loved it – as they should have.  Yet both groups, especially the Conservatives, don’t seem to reject the New Deal when given opportunities.  National Review for example, published a glowing review.  Yet what is the difference between FDR’s actions and experimentations and Mitt Romney’s plan to revitalize Detroit?  How can they love Romney and give support to a book that is so critical of the New Deal.  Either you reject the New Deal or you are necessarily accepting big government.  Sure we can quibble about size, at the margin, but it will be big.


Review of “The Forgotten Man” by Amity Shlaes

January 29, 2008

It’s really tough to organize some concise thoughts about a book that you liked as much as I liked this book.

 

Reviewing the reviewers

 

Other reviewers were generally favorable.  Professor Kling draws some great lessons from the book.  He thinks it’s not a polemic, but it will certainly seem like one to non-economists.  Even economists may find her take on the gold standard interesting, as Foreign Affairs notes (if FDR got gold right, it would have been the only thing he got right, economically).  There are other favorable reviews at Commentary and National Review.

 

For a different take from an economist, see Economic Principles.  But, the most obvious alternative interpretation is well-provided by John Updike (the only reviewer who found the book “choppy” instead of “read[ing] almost as smoothly as if it were a novel”) in The New Yorker:

 

Roosevelt made such people feel less alone. The impression of recovery—the impression that a President was bending the old rules and, drawing upon his own courage and flamboyance in adversity and illness, stirring things up on behalf of the down-and-out—mattered more than any miscalculations in the moot mathematics of economics. Business, of which Shlaes is so solicitous, is basically merciless, geared to maximize profit. Government is ultimately a human transaction, and Roosevelt put a cheerful, defiant, caring face on government at a time when faith in democracy was ebbing throughout the Western world. For this inspirational feat he is the twentieth century’s greatest President, to rank with Lincoln and Washington as symbolic figures for a nation to live by.

 

Interviews with the author can be found here and here.

 

My review and my beef with the positive reviewers

 

The title of Ms Shlaes’ book comes from a quote from William Graham Sumner:

 

"As soon as A observes something which seems to him to be wrong, from which X is suffering, A talks it over with B, and A and B then propose to get a law passed to remedy the evil and help X. Their law always proposes to determine what C shall do for X, or in the better case, A, B, and C shall do for X. . . . What I want to do is to look up C. I want to show you what manner of man he is. I call him the Forgotten Man. Perhaps the appellation is not strictly correct. He is the man who never is thought of. . . .

 

He works, he votes, generally he pray-but he always pays. . . ."

 

Ms Shlaes set out to write the history of C.  Instead she seems to have written a history of the changing ideal of the “the forgotten man.”  Prior to the depression, the forgotten man, C, was an American Ideal.  During the depression, FDR changed that ideal.  Instead of C, X became the ideal and the image of America.  With the exception of the marvelous chapter on the Schechters, the book’s focus is really on A and B.

 

A were the intellectuals, whom FDR brought into government.  Ms Shlaes is careful to point out their sympathies with Russia (and Italy), without lapsing into the off-putting, crazy denunciations of communists that make people ignore arguments.  She’s less subtle about pointing out their total failure to come up with any ideas to help the economy.  B were the politicians, who used the X’s not only to make themselves feel better, but maintain their hold on power and to increase their power.  None of the politicians were better at this than FDR.

 

The real C’s of the world would still make an interesting history.  Why did they vote for politicians who continued and deepened the depression?  The answer she seems to give is that people were afraid.  FDR sold (yes, there was a conscious selling of the depression that comes across in the book, complete with propaganda agencies) the depression as a crisis, which we needed to fight on a war footing.  Later, when his failures became more obvious, he could point to real wars that required mass governmental action.

 

Ms Shlaes sees the New Deal as a time when the private sector and the public sector battled for supremacy – with the public sector ultimately triumphing.  I wrote earlier about the New Deal as a time when the American people made an emphatic negative answer to the Founders’ question of whether or not we could have a government that would preserve liberty.  They chose a false sense of hope instead of liberty.

 

Ms Shlaes starts the story with the pre-New Deal, which looks remarkably similar to the early New Deal.  This pre-New Deal is the story of Mellon (one of the heroes of the book, along with Wilkie) vs. Hoover.  During the book, one can't help but see an early New Deal in Hoover’s plans, and also the death of the previous notion of the US, of the Founders’ experiment, with the death of Mellon.

 

Hoover would propose a beneficent hand "our mass of regulation of public utilities and our legislation against restraint of trade is the monument to our intent to preserve an equality of opportunity."  This hand made the initial mistakes that deepened, prolonged and caused the Great-ness of the Depression.  Hoover intervened in business, forced through a highly protective tariff and attacked the stock market.  FDR would later follow similar policies.  Then came the real killer – deflation.  Ms Shlaes believes deflation could have been avoided by allowing the gold standard to operate as it would have without intervention from the Fed or by pumping money into the economy as the Fed would do today.  (Her discussion of new currencies being produced by municipalities when dollars ran out was fascinating.)  Instead the Fed did the opposite.  So, did Hoover, who rammed through a tax increase.

 

Now the democratic pressure for action mounted (with many references to Mussolini and his "success" in Italy).  In came Roosevelt, who tried the same things Hoover tried, only more so.  Then he tried some other stuff, often these things were contradictory and were informed by no clear economic ideas.  Ms Shlaes' Roosevelt comes across as a man who cannot make up his mind beyond believing that business is bad and that he needs to keep doing stuff.  The result was a conflicting, unprincipled mess of agencies and programs that frightened capital and innovation.  Roosevelt was fed ideas from a series of intellectuals, including Frankfurter and Tugwell, who come across particularly poorly.

 

Don’t believe that Roosevelt could have been this kooky?  How about this:

 

One morning, FDR told his group he was thinking of raising the gold price by twenty-one cents.  Why that figure? his entourage asked.  “It's a lucky number,” Roosevelt said “because it's three times seven.”

 

Roosevelt peddled the belief that the depression may be a permanent feature of American life – and hence required massive changes to the American form of government.  Of course there was no time to amend the constitution accordingly.  So many changes paralyzed capital and confused everyone, even FDR, who couldn't figure out how to file his own taxes, as they required “higher math”.

 

One of the most pernicious experiments was the NRA, whose code "determined the precise components of macaroni" among other absurdities.  Then came Roosevelt's on again, off again changes to the gold standard, which served only to confuse everyone.  Then came the killing of livestock to keep prices going up.  Roosevelt seems to have been obsessed with nominal price increases (during deflationary periods!), even after they proved totally ineffectual.

 

After radical economic experimentation failed Roosevelt moved to legal prosecutions against business, large and small.  Or as Ms Shlaes puts it, if the New Deal "couldn't win a genuine return to prosperity, then it might succeed with the negative victories of bringing down the villains."

 

The Schechter trial was covered in detail.  The poor small businessmen and immigrants could not get their heads around "the idea that a government regulation was higher than a religious precept."  Trial was confusing for the Schechters, as the prosecutors seemed to be "saying that the economy must operate one way because the law said so."  But "the market had its own natural laws . . . it was neither good nor evil" . . . it was just reality.

 

Roosevelt, concerned that his gold policy would be struck down by the court "told Secretary Henry Morgenthau and Homer Cummings at lunch that he hoped to keep the bond market in confusion until the Supreme Court decided the gold-clause issue.  Then, if the Court decided against the administration, things would still be so rough that the people would turn to the president and say: 'For God's sake, Mr. President, do something.'"

 

Several of the justices, dubbed the Four Horsemen, made a stand, but the steamroller of democracy was too much, even after the court-packing scheme backfired.  As Justice McReynolds wrote of the currency manipulation "This is Nero at his worst.  As for the Constitution, it does not seem too much to say that it is gone."  Or as Justice Sutherland who said "the meaning of the Constitution does not change with the ebb and flow of economic events."  Sadly, he seems to have been proved wrong.  Ms Shlaes is also careful to not that when FDR finally got to make his first appointment to the Court he opted for a Klan member.

 

Roosevelt next turned to politics, after judicial attacks had run their course.  Here, he would focus on gaining support of enough specific groups to win re-election.  As he said, foreshadowing today's resurgence of concern about instability, "the civilization of the past hundred years with its startling industrial changes has tended more and more to make life insecure."  Roosevelt would be the first to take advantage of the new, highly democratic, nature of American politics.

 

All the changes caused pressure to mount to the point that new investment was nearly impossible and profits were squeezed to the breaking point.  This tightening, combined with increased uncertainty, prevented stocks from recovering to 1929 levels until 10 years after Roosevelt's death.

 

Even two terms in, the economy experienced another dramatic downturn.  However this drop in market values was not fatal to Roosevelt because of the war, which is where the book ends.  Ms Shlaes points out that the picture of the US that Roosevelt emphasized, changed to suit the new needs of war.  Images of poverty and old age were exchanged for economic strength and self-reliance.  Unfortunately, the war made everyone forget that the Republicans had been right about the economy all along.  In the end they would get no credit (instead the "error of their isolationism was what stood out").  Ms Shlaes has done her part to rectify this failure in the historical record.

 

We have other lessons to learn.  We should learn, but it should be obvious, that government cannot be an engine of experimentation.  Once government tries something, it can’t stop it.  The only New Deal programs that seem to have gone away were the ones declared unconstitutional.  The nature of the private sector allows for failure and the correction of failure.  The nature of government does not.

 

One marvels at how it was possible for Mr Updike to read the book and conclude that the behavior of government bureaucrats was fundamentally and necessarily nobler than the behavior of people in business.  It’s shocking that he could believe that FDR provided hope, and that that hope was sufficient to elevate to the status of our best presidents.  After all, it seems he was only providing us with hope that he would eventually fixed all the problems he caused and deepened.


More thoughts on the New Deal and the Breakdown of the Conservative Movement in America

January 27, 2008

The United States started as an experiment. Many people mistakenly believe that this experiment was about Democracy – to see if Democracy would work.

Instead, the experiment was about Liberty. The Founders wanted to see if they could design a government that would protect, instead of invade, liberty.

The New Deal, I think, was an attempt to answer the Founder’s question, in the negative. The reformers argued that liberty was ugly. It led to some nasty consequences. Businesses were the most powerful institutions (not that they were anywhere near as powerful as today’s governments are), nothing was planned, people had hard lives, etc. New ideas came to the US from other countries that excited these intellectuals. Other countries were planning things and their citizens were cooperating. Sure, liberty had to be destroyed to make these things happen, but think of all that we could gain.

I believe that new histories of the New Deal have shown that the reformers’ replacement for liberty was not better. I also believe that the Conservative movement was the major force making this point in the US, until recently.

Generally the Conservative Movement is divided into 3 groups, religious/traditional conservatives, libertarian/economic conservatives and anti-communists. However, it’s too often not made clear that each of the groups reacted against the New Deal. The religious groups and traditionalists saw the New Deal as State made Supreme. The state was supplanting roles previously left to the churches and communities. Further, the state was turning us all into adolescents and thereby destroying virtue. Libertarians saw the New Deal as a major threat to liberty. Anti-communists saw the US moving down the Road to Serfdom. The Soviet Union provided an obvious target for the anti-communists, but even after it fell, our government didn’t let us stop marching down the road.

Since the Soviet Union fell, the Conservative Movement has changed. Many people lost the desire to fight on after the fall. But this confuses the enemy for a specific embodiment of the enemy. The enemy is still there and still needs fighting, the enemy was the New Deal and its philosophical underpinnings.

Rush Limbaugh has said the Conservative Movement will die if Huckabee or McCain win the nomination. I think that’s nearly perfectly backwards. The death of the Conservative is happening before our eyes, as the only anti-New Deal candidate, Ron Paul, is considered outside the movement. The movements’ chosen one, Mitt Romney, couldn’t be more comfortable with the New Deal (ok, maybe Huckabee is more comfortable).

To revive the Movement, Conservatives must stop identifying success with the electoral success of the Republican Party. The point is respond to the original experiment of the Founders’. To the question of whether or not it’s possible to have a government that will protect liberty, the answer should be “yes.” That answer is in direct conflict with the New Deal’s resounding “no.”